Sunday, April 18, 2010

Whiting USA Trust I (NYSE:WHX) 13 Percent Yield

Whiting USA Trust I (NYSE:WHX), a spinoff of Whiting Petroleum Corp (NYSE:WLL), is a little-known small-cap energy company which generates huge yields for shareholders, now standing at 13.2 percent.

Most revenue of the trust is generated from the sale and production of natural gas and oil from the properties it owns, with 90 percent of revenue driven by that business model.

Even better news, with natural gas prices under heavy downward pressure because of enormous amount of reserves and new ways to tap into shale gas much more inexpensively, the oil reserves are higher, with approximately 56 percent represented, and 44 percent of reserves are held in natural gas.

The royalties received by Whiting USA Trust are distributed on a quarterly basis to shareholders. Over the last four quarters distributions reached $2.55, a trailing yield of 13.2 percent.

Understand that this is a trust which owns depleting assets, and will be terminated once 9.11 million barrels of oil equivalent have been produced. The estimated reserve balance is at 6.0 MMBOE, and is expected to last through 2017, with a depletion rate of 14.6 percent from 2010 through 2017.

Everything with this company is connected to where the price of gas and oil will go from here. With natural gas prices down low, and oil poised to go up in price, this could be a great play for several years, as the company will almost assuredly increase distributions going forward.